LinkedIn post10 Apr 2024 09:07
“Never has it been so hard for so long……
Today we published the mandatory hundreds of pages on THG’s performance for 2023 😬
So how did we/THG do?
· Revenues were c£2bn, down -2.8%, returning to growth of +1.1% in Q4
· Profits of £120.4m, up +48% vs 2022
· We generated +£174m operating cashflow, +98% vs 2022
· We reinvested +£126m of cash generated into tech and capex projects for future growth
And so 2023 was a record profit performance for THG, better than the Covid highs. But this in no way tells the story. It’s been brutal running THG these past 2 years.
Any consumer facing business knows exactly how lively it's been since the start of 2022 - carnage. At THG, it's felt like a F1 race, but on a track covered with thick fog, torrential rain, crashes, potholes, and cheating track marshals!
Inflation exploded in early 2022 and, like everyone, THG was facing dramatic cost increases. Central banks also wanted to slow consumer spending, raising interest rates at record speed. Not a dream scenario.
What did we do? Firstly, we reviewed every area of THG, asking how we could run it differently given what was coming. The vast majority of THG’s costs are in People, Fulfilment & Marketing - in that order. And so, we looked for ways to improve in each area.
At the start of 2022, THG had 10,000 staff. We always carried 10% extra people – our “growth” capacity. But with growth set to slow, we used natural attrition to normalise staff levels. That’s a £40m pa saving.
Ingenuity had just completed a huge roll out of logistics automation across the globe, costing fortunes. It was pay back time from this capex. From the get-go, the site efficiencies were better than we'd hoped, allowing THG to run the sites with 2,000 fewer people. This gave us a £85m pa saving.
So 2 years on, we have 3,000 fewer staff, with the majority of the reduction due to a huge automation roll out. Sadly, not every leaver was the result of natural attrition, but most were.
This means we now have miles more growth capacity as well as £125m pa of savings across our 2 biggest cost areas. The teams across THG have done the most incredible job, pulling together to deliver these changes.
Adding more people to a business isn't always a measure of of progress. In the new world of AI and higher costs, less is more. We've been lucky - our huge tech and automation investments completed just as inflation exploded, bringing the savings when we really needed them - better to be lucky than good!
THG returned into growth in Q4 and should now power on further in 2024.
I’m super proud of THG’s performance in 2023. So much goes on behind the scenes through the year, each year is worthy of a book 😉 But the true highlight of 2023 is how our people rose to the challenge, delivering this 2023 result while navigating so many curve balls, and of the course, the UK’s dire public market.
(pics are today's City call in our boardroom)
#investment
Sign In
Follow the stocks
